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New health and social care levy guidance

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HMRC has published new guidance on the intended increase in the rates of National Insurance contributions from 6 April 2022, as the first part of the introduction of the health and social care levy. Although the government is widely reported to be under pressure to postpone the increase, given the steep increase in the cost of living in 2022 and other political pressures, writing in the Sunday Times (paywall) the prime minister and chancellor have committed to the increase.

From 6 April 2022 primary and secondary Class 1 contributions, and Class 1A, Class 1B and Class 4 NICs will increase by 1.25% percentage points. Individuals over state pension age will not be affected (although employer NICs for those employees will increase accordingly).

From 6 April 2023, NICs will revert to 2021/22 rates, and instead a new health and social care levy will be introduced – effectively a new tax, at a rate of 1.25%. The levy will operate in the same way as NICs and will be charged on earnings or profits that are already subject to NICs. Various existing NICs exemptions will also apply to the levy (e.g. secondary contributions relief in relation to employees under 21, apprentices under 25 and employees in freeport tax sites – subject to the respective upper thresholds). One key difference from 6 April 2023 is that those above state pension age will not be exempt from the levy.

The guidance includes three useful tables, setting out the position for those who are self-employed, employees and those who are above state pension age.

Issue: 1562
Categories: News